An ampirical assessment of two testable hypotheses of the sraffian supermultiplier for Argentina 1993-2021

DVOSKIN, ARIEL; MEDICI, FLORENCIA

Rio de Janeiro

Congreso; Pre-Conference: Structuralism, Classical Political Economy and Demand-Led Growth; 2023

Instituto de Economia, Universidade Federal de Rio de Janeiro

In recent times, Sraffian Supermultiplier Model (SSM) (Freitas & Serrano, 2015; Serrano, 1995; Serrano et al., 2019) has become increasingly prominent in both theoretical and empirical discussions within the demand-led-growth framework. The model has three distinctive features: the rate of growth of output is determined by the rate of growth of non-capacity generating expenditure; investment is an induced variable of output; and distribution is exogenous.This manuscript provides new evidence that the growth rate of GDP ultimately depends on the growth rate of autonomous demand. Specifically, we examine the first two features of the SSM through two different empirical exercises for Argentina, from 1993 to 2021. In the first one we estimate a Vector Equilibrium Correction Model (VECM) using the Johansen method for cointegration analysis (Johansen, 1988, 1991). This econometric approach allows us to show that the autonomous components of demand are weakly exogenous variables, with outputadjusting to long-run deviations between these autonomous components and GDP. The second exercise tests the existence of a mechanism that adjusts productive capacity to demand, based on the flexible accelerator principle. Employing a VAR analysis, we present evidence thatinvestment share is Granger-caused by GDP, consistent with the SSM´s framework.Through these empirical analyses, we give new insights into the intricate relationship between autonomous expenditures, output dynamics, and investment behavior, shedding light on the underlying drivers of GDP growth.